The Taxation of Pension Schemes (Transitional Provisions) Order 2006

• (a) after the words “held for the purposes of the arrangement as” add the words “meet condition A, B or C.”.

• (b) omit sub-paragraphs (1)(a) and (b).

• (c) after sub-paragraph (3) add—

(3A) Condition C is that immediately before the 6th April 2006 — (a) the sums and assets were part of the member’s pension fund which fell within sub-paragraph 1(1)(a) of Schedule 36; and (b) the member was drawing a pension payable from the resources of— (i) a small self-administered scheme as defined in the Retirement Benefits Schemes (Restriction on Discretion to Approve) (Small Self-administered Schemes) Regulations 1991, or (ii) a small self-administered scheme that had been approved under section 590 of ICTA, and the rules of scheme on 5th April 2006 did not require the purchase of an annuity in respect of the member.

Dependant’s alternatively secured pension funds

32

• (1) In the case of an individual who meets the conditions set out in paragraph (2), paragraph (3) applies.

• (2) The conditions are as follows.

• Condition AThe individual had reached the age of 75 before 6th April 2006.

• Condition BThe individual is a dependant of a member who was a member of a scheme which falls within sub-paragraph 1(1)(a) of Schedule 36.

• Condition CThe individual was, on 5th April 2006, entitled to a pension which was not provided under a defined benefits arrangement and was payable from the resources of—a small self-administered scheme as defined in regulation 2 of the Retirement Benefits Schemes (Restriction on Discretion to Approve) (Small Self-administered Schemes) Regulations 1991, ora small self-administered scheme that had been approved under section 590 of ICTA,and the rules of the scheme on 5th April 2006 did not require the purchase of an annuity in respect of the individual.

• (3) Paragraph 25(1) of Schedule 28 (dependant’s alternatively secured pension fund)¹⁴⁵ shall be modified as follows—

• (a) after the words “held for the purposes of the arrangement as” add the words “meet condition A, B or C.”.

• (b) omit sub-paragraphs (1)(a) and (b).

• (c) after sub-paragraph (3) add—

(3A) Condition C is that immediately before the 6th April 2006 — (a) the sums and assets were part of the dependant’s pension fund which fell within sub-paragraph 1(1)(a)of Schedule 36; and (b) the dependant was drawing a pension payable from the resources of— (i) a small self-administered scheme as defined in regulation 2 of the Retirement Benefits Schemes (Restriction on Discretion to Approve) (Small Self-administered Schemes) Regulations 1991, or (ii) a small self-administered scheme that had been approved under section 590 of ICTA, and the rules of the scheme on 5th April 2006 did not require the purchase of an annuity in respect of the dependant.

Serious ill-health lump sums, pension protection lump sum death benefits and annuity protection lump sum death benefits

33

• (1) In the case of an individual who meets the conditions set out in paragraph (2), paragraphs (3), (4) and (5) apply.

• (2) The conditions are as follows.

• Condition AThe individual is a member of a scheme which falls within sub-paragraphs 1(1)(a) to (g) of Schedule 36.

• Condition BThe individual has an actual (rather than a prospective) right to the payment of one or more relevant existing pensions under that scheme on 6th April 2006.

• (3) In paragraph 4(2) of Schedule 29 (serious ill-health lump sum) for the words “the member has not previously become entitled to any pension or lump sum” substitute—

the member has a prospective (rather than an actual) right to the payment of one or more relevant existing pensions.

• (4) In paragraph 14(3) of Schedule 29 (pension protection lump sum death benefit)—

• (a) in the formula, for “AC” substitute “PCPR”;

• (b) for the definition of AC substitute—

PCPR is the value of the individual’s pre-commencement pension rights as defined in paragraph 20(3) to (5) of Schedule 36.

• (5) In paragraph 16(3) of Schedule 29 (annuity protection lump sum death benefit)—

• (a) in the formula, for “AC” substitute “PCPR”;

• (b) for the definition AC substitute—

PCPR is the value of the individual’s pre-commencement pension rights as defined in paragraph 20(3) to (5) of Schedule 36.

• (c) in the definition of “AP”, for “the member becoming entitled to the pension or annuity” substitute “6th April 2006”.

Payments to children aged 23 or over

34

• (1) Paragraph (2) applies to the payment of a pension death benefit by a pension scheme which falls within paragraph 1(1) of Schedule 36 where—

• (a) either of Conditions A and B is satisfied and the first scheme rules condition is satisfied; or

• (b) Condition C and the second scheme rules condition are satisfied.

• (2) Paragraph 15(2) of Schedule 28 shall be modified as follows—

• (a) at the end of paragraph (a) omit the word “or”; and

• (b) after paragraph (b) insert—

(c) has reached that age and is in full time education or undertaking vocational training, or (d) on reaching that age or, if later, on ceasing full time education or vocational training is, in the opinion of the scheme administrator, suffering from physical or mental deterioration which is sufficiently serious to prevent the individual from following a normal employment or which would seriously impair his earning capacity.

• (3) The Conditions A, B and C mentioned in paragraph (1) are:

• Condition AThe pension was in payment to a child (“C”) of the member (“M”) on 5th April 2006 or M had died on or before that date and a pension was due to come into payment to C.

• Condition BThe pension was in payment to M on 5th April 2006 and C was born on or before 5th April 2007.

• Condition CAn election such as is described in the second scheme rules condition had been made by M and accepted by the scheme administrator on or before 5th April 2006.

• (4) The scheme rules conditions mentioned in paragraph (1) are:

• First scheme rules conditionThe rules of the pension scheme allowed a pension to be paid to a child (“C”) of the member (“M”) following M’s death until C ceased full-time education or vocational training.

• Second scheme rules conditionThe rules of the pension scheme on 10 December 2003 allowed an irrevocable election to be made designating part of the sums or assets representing M’s rights as available for the payment of a pension to C following M’s death until C ceased full-time education or vocational training.

• (5) For the purpose of the first scheme rules condition, a rule that the pension would not be paid to C if or after C reached a specified age (even if that is before C ceased full-time education or vocational training) does not prevent the condition being satisfied.

• (6) Paragraph (2) also applies to the payment of a pension death benefit by a qualifying transferee scheme (as to which see article 34B) where either—

• (a) paragraph (2) had applied to payment by the original pension scheme or another transferee pension scheme; or

• (b) paragraph (2) would have applied—

• (i) if there had been no block transfer on or after 6th April 2006, and

• (ii) if payment had been by the original pension scheme.

Payments to financially dependent children aged 23 or over

34A

• (1) Paragraph (2) applies to the payment of a pension death benefit by a pension scheme which falls within paragraph 1(1) of Schedule 36 where—

• (a) any of Conditions A to D is satisfied; and

• (b) the scheme rules condition is satisfied.

• (2) Paragraph 15(2) of Schedule 28 shall be modified as follows—

• (a) at the end of paragraph (a) omit the word “or”; and

• (b) after paragraph (b) insert—

(c) has reached that age and— (i) is financially dependent on the member at the date of the member’s death, or (ii) the financial relationship with the member at the date of the member’s death is one of mutual dependence.

• (3) The Conditions A to D mentioned in paragraph (1) are:

• Condition AThe member’s (“M’s”) pension was in payment on or before 1st July 2008.

• Condition BThe pension death benefit was in payment on 1st July 2008.

• Condition CThe entitlement to the pension death benefit arose before 1st July 2008.

• Condition DThe entitlement to the pension death benefit was subject to the discretion of the trustees of the scheme and the discretion was capable of being exercised (in favour of the child having such an entitlement) so that the entitlement could have arisen before 1st July 2008.

• (4) The scheme rules condition mentioned in paragraph (1) is:

• Scheme rules conditionThe rules of the pension scheme on 5th April 2006 allowed a pension to be paid to a child (“C”) of the member (“M”) following M’s death if, at the date of M’s death, C was financially dependent on M or C’s financial relationship with M was one of mutual dependence.

• (5) Paragraph (2) also applies to the payment of a pension death benefit by a qualifying transferee scheme (as to which see article 34B) where—

• (a) paragraph (2) had applied to payment by the original pension scheme or another transferee pension scheme; or

• (b) paragraph (2) would have applied—

• (i) if there had been no block transfer on or after the relevant date, and

• (ii) if payment had been by the original pension scheme.

• (6) For the purposes of paragraph (5), the relevant date is—

• (a) in relation to Condition A, the later of—

• (i) 6th April 2006, and

• (ii) the date on which the member’s pension came into payment; and

• (b) in relation to Condition B, C or D, the later of—

• (i) 6th April 2006, and

• (ii) the date of the member’s death.

Meaning of “qualifying transferee scheme”

34B

• (1) A pension scheme is a qualifying transferee scheme for the purposes of articles 34 and 34A if it is a pension scheme to which there has been a relevant block transfer.

• (2) A block transfer is relevant if any of Conditions A to C is satisfied as a result of—

• (a) a block transfer from a pension scheme within paragraph 1(1) of Schedule 36 (“the original pension scheme”); or

• (b) a block transfer to a pension scheme (“a transferee pension scheme”) from a pension scheme that was a transferee pension scheme in relation to the original pension scheme by virtue of the previous application of sub-paragraph (a) or the previous application (on one or more occasions) of this sub-paragraph.

• (3) The Conditions A to C mentioned in paragraph (2) are:

• Condition AThe member became a member of the transferee pension scheme.

• Condition BThe child is a pensioner member of the transferee pension scheme.

• Condition CAn irrevocable election having been made designating part of the sums or assets representing the member’s rights as available for the payment of a pension to the child, the child is entitled to such payment from the transferee pension scheme.

• (4) In this article, “block transfer” has the meaning given by paragraph 22(6) of Schedule 36, but with the modification that for “as is prescribed” in paragraph (b) there is substituted “as has been prescribed”.

Enhanced protection and transfers made in connection with the winding up of a pension scheme

35

• (1) In the case of an individual who meets the conditions in paragraph (2), paragraph 12 of Schedule 36 (transitional provisions — “enhanced protection”) is modified in accordance with paragraph (3).

• (2) The conditions are—

• Condition AThe individual is one to whom paragraph 12 of Schedule 36 applies.

• Condition BThe pension scheme of which the individual is a member makes a recognised transfer of sums or assets to an insurance company pursuant to section 169(1A)¹⁴⁶ (permitted transfers).

• Condition CThe transfer is made in connection with the winding up of the pension scheme from which the transfer is made.

• (3) Paragraph 12(8) is modified as follows—

• (a) after paragraph (a) delete the word “or”; and

• (b) after paragraph (b) add—

or; (c) the transfer is a recognised transfer pursuant to section 169(1A).

Transfer of crystallised rights with enhanced protection

36

• (1) In the case of an individual who meets the conditions in paragraph (2), paragraph 15 of Schedule 36 (definition of the “relevant crystallised amount”) is modified in accordance with paragraph (3).

• (2) The conditions are—

• Condition AThe individual is one to whom paragraph 12 of Schedule 36 applies.

• Condition BThe individual is in receipt of a scheme pension.

• Condition CThe pension scheme of which the individual is a member makes a recognised transfer of sums or assets in connection with the winding up of the pension scheme.

• (3) Paragraph 15 is modified as follows—

• (a) at the end of sub-paragraph (1) add—

This paragraph is subject to sub-paragraph (1A).

; and

• (b) after that sub-paragraph insert—

(1A) If the relevant event is a transfer of sums or assets representing crystallised rights under a scheme pension and made in connection with the winding-up of the pension scheme under which the scheme pension is paid, the relevant crystallised amount shall be nil.

Modification of section 637G ITEPA 2003

37

• (1) Section 637G of ITEPA 2003 (trivial commutation and winding-up lump sums) is modified as follows in relation to an equivalent pension benefits commutation lump sum pursuant to regulation 2(1A) of—

• (a) the Occupational Pension Schemes (Assignment, Forfeiture, Bankruptcy etc) Regulations 1997¹⁴⁷; or

• (b) the Occupational Pension Schemes (Assignment, Forfeiture, Bankruptcy etc) Regulations (Northern Ireland) 1997¹⁴⁸.

• (2) In the heading, at the end insert “etc”.

• (3) In subsection (1)—

• (a) at the end of paragraph (a) omit “or”;

• (b) at the end of paragraph (b) add “or”; and

• (c) after that paragraph insert the following paragraph—

(c) an equivalent pension benefits commutation lump sum,

• (4) In subsection (4), after “In this section” insert “—

• “equivalent pension benefits commutation lump sum” means a lump sum payment arising from the commutation of equivalent pension benefits pursuant to—regulation 2(1A) of the Occupational Pension Schemes (Assignment, Forfeiture, Bankruptcy etc.) Regulations 1997, orregulation 2(1A) of the Occupational Pension Schemes (Assignment, Forfeiture, Bankruptcy etc.) Regulations (Northern Ireland) 1997;

Lump sum payments — general

38

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Lump sums — serious ill-health

39

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Lump sum death benefits— death of member

40

• (1) This paragraph applies to a lump sum paid—

• (a) in respect of the death, occurring before the 6th April 2006, of a member of a pension scheme;

• (b) within two years of the date upon which the administrator of the pension scheme could reasonably have known of the member’s death;

• (c) by a scheme which is treated as becoming a registered pension scheme on the 6th April 2006 by virtue of paragraph 1(1) of Schedule 36;

• (d) in accordance with the rules of that scheme as they stood—

• (i) immediately before the death; or

• (ii) immediately before the 6th April 2006; and

• (e) in circumstances which would not have led to the Commissioners withdrawing the approval of the scheme.

• (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (3) A lump sum to which paragraph (1) applies shall be chargeable to income tax in accordance with section 648B of ICTA¹⁴⁹ as if—

• (a) that section had not been repealed;

• (b) references in that section to the administrator of the scheme were references to the scheme administrator of the registered pension scheme which is treated as coming into being by virtue of paragraph 1(1)(g) of Schedule 36;

• (c) subsection (3) were omitted; and

• (d) the reference in subsection (4) to the rules of the scheme were a reference to the rules of the personal pension scheme as they stood immediately before the 6th April 2006.

• (4) For the purposes of a lump sum payment to which paragraph (1) applies, regulation 5 of the Personal Pension Schemes (Information Powers) Regulations 2000¹⁵⁰ (“the 2000 Regulations”) shall continue to have effect, subject to the following modifications—

• (a) references to the scheme administrator of the personal pension scheme are to be read as references to the scheme administrator of the registered pension scheme which is treated as coming into being by virtue of paragraph 1(1)(g) of Schedule 36; and

• (b) in paragraph (2) of that regulation for “an approved personal pension scheme” substitute “the registered pension scheme”.

• (5) In section 98(5) of the Taxes Management Act 1970 the entry in Table 1 relating to regulations under section 651A(1)(b) to (d) of ICTA shall continue to have effect, so far as it relates to regulation 5 of the 2000 Regulations as saved, with modifications, by paragraph (4).

• (6) In this article and article 41—

• “the Commissioners” means the Commissioners for His Majesty’s Revenue and Customs and, in relation to times before 18th April 2005, includes the Commissioners of Inland Revenue;

• “existing scheme” means a scheme which becomes a registered pension scheme by virtue of paragraph 1(1) of Schedule 36 (pension schemes etc.: transitional provisions and savings — deemed registration of existing schemes);

• “member” means a member of an existing scheme.

Lump sum death benefits — death of a dependant

41

• (1) This paragraph applies to a lump sum paid—

• (a) in respect of the death, occurring before the 6th April 2006, of a dependant of a former member of a pension scheme;

• (b) by a scheme which is treated as becoming a registered pension scheme on the 6th April 2006 by virtue of paragraph 1(1)(g) of Schedule 36 (personal pension schemes);

• (c) within two years of the date upon which the administrator of the pension scheme could reasonably have known of the dependant’s death;

• (d) in accordance with the rules of that scheme as they stood—

• (i) immediately before the dependant’s death; or

• (ii) immediately before the 6th April 2006; and

• (e) in circumstances which would not have led to the Commissioners withdrawing the approval of the scheme.

• (2) Paragraphs (3) to (5) of article 40 apply for the purposes of paragraph (1) as they apply for the purposes of paragraph (1) of that article.

Protected pension age and multiple pensions

42

• (1) In the case of a member who has a protected pension age in connection with at least two of the three types of pension listed in paragraph (2) from the same registered pension scheme, Schedule 36 is modified in accordance with paragraph (3).

• (2) The three types of pension are—

• (a) a scheme pension under a defined benefits arrangement;

• (b) a scheme pension under a money purchase arrangement;

• (c) a lifetime annuity.

• (3) In paragraphs 22(7)(a) and 23(7) for “on the same date” substitute “within a period of six months beginning with the earliest date on which the individual becomes entitled to any of the benefits.”.

Protected pension age and multiple pensions - member dies before receiving all pensions

43

• (1) Schedule 36 is modified in accordance with paragraphs (3) and (4) where—

• (a) a member has a protected pension age in connection with at least two of the three types of pension listed in regulation 42(2) from the same registered pension scheme;

• (b) the member dies before the end of the specified period after becoming entitled to at least one but not all of the benefits in respect of the pensions; and

• (c) the scheme administrator considers that, had the individual not died, the individual would have become entitled to all of the benefits in respect of the pensions within the specified period.

• (2) The “specified period” is the period of six months beginning with the earliest date on which the individual became entitled to any of the benefits in respect of the pensions.

• (3) For paragraph 22(7)(a) substitute—

(a) the scheme administrator considers that, had the individual not died, the member would have become entitled to all the benefits payable to the member under arrangements under the pension scheme (to which the member did not have an actual entitlement on or before 5th April 2006) within a period of six months beginning with the earliest date on which the individual became entitled to any of the benefits, and

• (4) For paragraph 23(7) substitute—

(7) The retirement condition is met in relation to the member and the pension scheme if the scheme administrator considers that, had the individual not died, the member would have become entitled to all the benefits payable to the member under arrangements under the pension scheme (to which the member did not have an actual entitlement on or before 5th April 2006) within a period of six months beginning with the earliest date on which the individual became entitled to any of the benefits.

Normal minimum pension age – modification of section 165 (payment of pension rules)

44

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Normal minimum pension age – modification of paragraph 1 of Schedule 29 (lump sum rule)

45

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Signed

Vernon Coaker — Tom Watson — Two of the Lords Commissioners of Her Majesty’s Treasury — 9th March 2006

Editorial notes